According to the Revenue Recognition Principle, when should revenue be recorded?

The Revenue Recognition Principle dictates that revenue should be recognized when it has been earned, which means that the company has delivered a product or performed a service and has a reasonable expectation of collecting payment. This aligns with the accrual basis of accounting, which emphasizes recording revenues when they are earned, rather than when cash is received.

This principle ensures that financial statements reflect the actual performance of a business during a specific period. Recording revenue only when cash is received could misrepresent a company's financial position, especially if services have been rendered or goods delivered but payment is still pending. Therefore, recognizing revenue when resources have been earned captures the economic reality of a transaction and helps provide a more accurate picture of a company's profitability and financial health.

The other options fall short of the criteria established by the Revenue Recognition Principle; for instance, recognizing revenue solely upon receiving cash or sending an invoice does not necessarily reflect when the underlying economic activity has occurred. Recognizing at the end of the fiscal year also does not align, as it could distort the true revenue picture if transactions close before the year-end are not considered.